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BCC: 2014 growth must not be 'flash in the pan'

The British Chambers of Commerce (BCC) has upgraded its GDP growth forecasts for this year and next year, but is predicting a 'moderate slowdown' in 2015.

The latest BCC GDP growth forecast has been revised from 3.1% to 3.2% in 2014 and from 2.7% to 2.8% in 2015.

2014 will be the first year since 2007 that growth will have exceeded 3%. According to the BCC, this is largely due to stronger employment figures and higher expected growth for Q3 and Q4 2014 than previously forecast in May.

However, the BCC is forecasting a “moderate slowdown in growth” from 2015, with its prediction for 2016 remaining unchanged at 2.5%.

John Longworth, BCC director general, said everything possible must be done to ensure the strong growth in 2014 is not a 'flash in the pan'. He called the expected slowdown in 2015 and 2016 a 'warning sign' for the UK, which is currently too reliant on consumer spending as a growth driver.

On interest rates, the BCC forecasts that the first increase in official interest rates will happen in Q1 2015 and reach 0.75%. Thereafter, there will be 'modest increases' of 0.25 percentage points, with interest rates reaching 1.25% in Q4 2015 and 2.25% in Q4 2016, it said.

Other key forecasts include:

household consumption will slow markedly after official rates start rising in 2015;

the UK unemployment rate will fall to 4.9% by Q2 2017;

growth forecasts for the exports of goods and services have been reduced, from 1.9% to 0.8% for 2014 and from 4.2% to 4.1% for 2015.

John Longworth said: “The task at hand is to ensure that the stellar 2014 growth is not a flash in the pan. The UK must aim higher than accepting growth rates that simply go back to where they were before the recession, or worse – fall even lower. There is no reason why a 3% growth rate should be the height of our ambitions.”